When business relationships break down – the importance of contemporaneous evidence
The recent High Court decision in McIlroy v Minaar [2026] EWHC 2281 (Ch) provides helpful guidance on unfair prejudice claims under section 994 of the Companies Act 2006, particularly the significance of contemporaneous evidence and the consequences of arrangements that evolve informally over time. The Court’s finding also considers the extent of directors’ rights to access company information and the difficulties that can arise when the parties later disagree about what had been agreed in practice.
The proceedings concerned Liberas Solutions Limited, an IT consultancy business in which Karen McIlroy and Deon Minaar each held a 50% shareholding, with Mrs McIlroy holding her shares as nominee for her husband. Mrs McIlroy alleged that the company’s affairs had been conducted in a manner that unfairly prejudiced her interests, including through restrictions on access to financial information, unauthorised payments, the diversion of business and improper expenditure. The High Court dismissed the petition, rejecting all allegations of unfairly prejudicial conduct.
The fallibility of memory versus the objectivity of documents
In the early sections of his written judgment, HHJ Paul Matthews outlines the process and applicable principles involved with reaching a judgment in English civil law cases. In particular, he highlights the important role which contemporaneous evidence plays in the Court’s assessment of facts. Referring to Gestmin SGPS SA v Credit Suisse (UK) Ltd and Kinled Investments Ltd v Zopa Group Ltd, the judge emphasised the relative objectivity of contemporaneous documents when compared with an individual’s notoriously fallible recollections of events several years later, highlighting that the former should be given more weight.
In this case, the documentary record included WhatsApp messages, text messages and emails. The judge noted that these contemporaneous documents were important in enabling the Court to make a decision on both the honesty and the accuracy of the witness evidence provided during trial.
Informal arrangements and legal consequences
Another key issue was establishing what the parties had agreed in practice. Although Mrs McIlroy alleged that Mr Minaar had damaged the company’s business by facilitating direct arrangements between subcontractors and end-clients, the Court found that the parties had departed from their original agreement and adopted an increasingly “ad hoc” approach to how the business operated.
By 2020, the parties had agreed that each could retain the fees and margins from his own contracts. Therefore, the evolving arrangements were significant in determining what had been authorised between the parties and ultimately undermined allegations that conduct consistent with those arrangements was unauthorised or unfairly prejudicial.
Distinguishing information rights from management rights
The judgment also contained some interesting observations on the distinction between a director’s right to access company information and their ability to exercise the company’s powers individually. Directors are entitled to inspect the company’s books and records to enable them to carry out their duties, but the management of the company’s affairs and the exercise of its powers are generally matters for the directors collectively. A right to information therefore does not, without more, give an individual director authority to operate the company’s bank account.
Mrs McIlroy had access to the company’s financial information and was a bank signatory. However, this did not entitle her to operate the account unilaterally or require payments to be made only with her consent.
Key takeaways
The decision highlights three key points for directors and shareholders:
- Information rights and management powers are distinct;
- Contemporaneous documents are crucial in unfair prejudice disputes;
- Agreed departures from existing arrangements can have legal consequences (where shareholders have knowingly operated on a particular basis over time, this may affect whether conduct later challenged can properly be characterised as unauthorised or unfairly prejudicial).
McIlroy v Minaar demonstrates the significance that evolving business arrangements can acquire when relationships break down. What works in practice while shareholders are aligned can swiftly become contentious when their interests diverge, making contemporaneous records of what was said, agreed and done of vital importance.
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